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The Use of the Put Option in a Shareholder Agreement for a Family Business

June-9-2003

Area Corporate and Commercial

Summary


Thinking of going into business with a family member? While many family businesses do flourish and succeed, statistics suggest that less than one-third of such businesses survive the transition to the second generation. The same array of issues confronts both the family business enterprise and the non-family business enterprise. As a result of the special relationship between its members, however, a family business has a unique dynamic and an additional set of challenges. Since family problems can easily spill over into the business realm, a family business is particularly vulnerable. Generational differences can also lead to differing perspectives on a range of issues - from business strategy to the use of technology, for example - and can be a source of tremendous conflict.  This update discusses the use of put options in shareholder agreements to deal with irreconcilable differences.

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